BUSINESS OWNERSHIP
MARKETING 1
BUSINESS OWNERSHIP
• A characteristic of free enterprise- private
ownership
• Types of ownership determined through the legal
organization of the business
• Type of ownership is key decision for entrepreneur
• Four forms of business ownership
FORMS OF BUSINESS OWNERSHIP
• Sole Proprietorship
• Partnership
• Corporation
• Limited Liability Company (LLC)
SOLE PROPRIETORSHIP
• Owned and operated by one person
• Most common form of business ownership
• Approximately 70% of all U.S. businesses are sole proprietorship
• Sole Proprietor provides all of the skill, money, and
management to run the business
• Assumes ALL risk- unlimited liability
• Retains ALL profit
• Income taxed as personal income
EXAMPLES OF SOLE PROPRIETORS
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Housekeeping service
Landscape service
Plumber
Electrician
Web site designer/manager
CPA/ Accounting service
Shop/boutique owner
Restaurant owner
Business where ONE person owns and
operates the business
PARTNERSHIP
• Legal agreement between two or more people
for joint responsibility for success or failure of
business
• Represents about 10% of businesses in U.S.
• Formed by partnership agreement- legal
document
• Specifies responsibilities of each partner
• Profit/Loss shared by partners
TYPES OF PARTNERSHIPS
• General Partnership
• Limited Partnership
GENERAL PARTNERSHIP
• Each partner shares in profits and losses
• profit taxed as personal income for each partner
• Unlimited liability for company debts
LIMITED PARTNERSHIP
• Each partner responsible for debt of company but
limited to the amount of investment in the company
• Required that there is at least ONE General Partner
who has unlimited liability
• In exchange for limited risk, limited partners do not
have a voice in the management of the company
• Withdrawal of a limited partner does not dissolve the
company
CORPORATION
• Owned by several people but is considered “one
person” under the law
• Must obtain legal permission by state to operateprocess begun with an application to state
• Once permission granted this becomes the charter for
the corporation
• Considered to be a separate legal entity
• can borrow money, take out loans, sue, sign contracts,
and buy and sell property
CORPORATIONS
• Stockholders are owners of company- can sell stock
to raise capital for the corporation
• Stockholders elect Board of Directors to run the company
• Board of Directors make top management decisions affecting
the business
• Corporations offer owners limited liability (personal
affects of owner cannot be taken if company does
not meet its financial obligations or is sued)
• Corporation is not affected by death, incapacity, or
bankruptcy of a stockholder or officer
TYPES OF CORPORATIONS
• Private- formed by private persons; broad
category; can be “closely held”- which does not
sell stock on open market or “publicly held”which does sell stock
• Public- created by federal, state, or local
government- can include schools, transit
LIMITED LIABILITY COMPANY (LLC)
• Relatively new form
• Hybrid of partnership & corporation
• Owners (called members) are shielded from
personal liability
• All profits/losses pass directly to owners without
taxation
CLASS ACTIVITY
• Students work individually
• Compare and contrast the advantages and
disadvantages of each form of business
ownership
• Chart will be provided by teacher
• 50 Points